CAPITAL GAINS TAX HIKE LIKELY TO PUSH UP RENTS
30 April 2010
Whilst the recently announced changes in capital gains rules may mean that a higher rate of tax applies on any capital appreciation, the good news for existing landlords is that several observers are predicting that rents will increase substantially as a result of any such change.

Their rationale is as follows: a higher capital gains tax rate is likely to deter new buy-to-let landlords from entering the market, meaning that the supply of available properties in the private rental market will decrease. And as we have seen before, tighter property supply inevitably means higher rental prices.

One independent financial advisor that we spoke to pointed out that taking the money and investing in other asset classes may not be a very attractive option. "Interest rates are so low at the moment that holding the funds in cash and receiving 0.5% interest is a non-starter. The FTSE on the other hand is still extremely volatile and the rise in CGT applies to shares too. With rents forecast to rise and currently yielding 4.7% in London, bricks and mortar may still be your best option".

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